Renovate vs . Relocate : Which Makes More Sense ?
By : Lauri Coppock , Sr Loan Officer , PrimeLending , A Plains Capital Company
Is it Better to Remodel or Buy Bigger ? Here ’ s How to Decide .
Your family is growing and you ’ re running out of space for the little ones to sleep and play , while still allowing you room to keep your sanity . Or perhaps you need more room to house your hobbies and your spouse ’ s woodworking projects . No matter the cause , if it feels as though your home is about to burst at the seams , it may be time to upsize . When your home no longer fits your needs , you have two options : renovate your current home or purchase a bigger home . Which is the right decision for you ? Here are some factors to consider as you make your decision .
Evaluate the Benefits of a Remodel — Generally speaking , a remodel project is less expensive than buying a bigger home . If you can set a budget and stick to it , it ’ s likely more beneficial for your current finances to do the remodel rather than relocate . Additionally , if you like your current neighborhood , are in a good school district and are close to the amenities you enjoy , then making the choice to deal with the inconvenience of a remodel is probably worth it in the long run .
Think About the Advantages of Moving — Sometimes we just need a fresh start and buying a new home is always exciting . Finding a move-in-ready home that fits your family ’ s lifestyle and needs may be easier than knocking down walls in your current home , attempting to make a square peg fit into a round hole . For most people , moving to a new home is simply less of a hassle than living through a remodel , which may even require that you find temporary housing while the work is completed .
Look at What You Can Do with a Remodel — Does your community have restrictions on how big a home can be in relation to its plot of land ? In many cases , homes are already built to the allowed dimensions . If this is the case , adding on to your home ’ s existing footprint may not be an option .
Consider the Value of Your Land — The value of land tends to appreciate more than the value of a home . That being said , if you live on a larger plot of land , the substantial tax savings may be worth it to stay on your current property and do the remodel than to move to a new home where the taxable value may increase compared to your existing home .
Estimate the Resale Value of the Remodel — If you ’ re leaning towards an addition or remodel project , in addition to getting an estimate for the work , take a look at how much value all that work would add to your home ’ s resale value . How does it compare to the cost of other homes in your neighborhood ? Consider the ebbs and flows of the housing market as well . You may find that you simply won ’ t get your investment back , and if that ’ s the case , you may also find it difficult to get a bank loan to do the work . On the other hand , if the remodel work will bring your home up to or slightly above neighborhood standards , you almost can ’ t go wrong with a remodel .
Consider the Costs of Moving — When you buy a new home , don ’ t forget to take all the expenses into account . Not only are you making a down payment , but you must also consider financing charges , real estate commissions , moving costs , utility deposits , increased taxes and other expenses that might pile up during the transition . With the exception of your down payment , those are expenses that have no return , and you could easily write checks totaling $ 30,000 to $ 40,000 during a move from one house to another . In a remodel , that money goes right back into your home , and you will ( hopefully ) see a return on your investment one day .
Think Outside Your Current Area — The price of convenience is often steep . The further a house is from the city , the less expensive it will be ( in most cases ). If you need more space but are on a tight budget , consider moving to the outskirts of town , where land and houses tend to cost less . Of course , there are other costs to consider as well , such as the extra expense for gas and car maintenance to cover a longer commute . Living in the suburbs works well for some families , but it isn ’ t necessarily the best option for everyone .
Make the Decision That ’ s Best in the Long Run — While you ’ re trying to suit your family ’ s current needs , it ’ s important to look into the future and consider which option is best for your family over time . Will simply adding more bedrooms or an extra bathroom accommodate your family ’ s long-term needs , or is it just a temporary fix ?
Whether you make the decision to stay put and remodel your home to fit your needs , or decide the best option is to relocate to a new home , there are significant financial commitments to be made . Go through each option above to make a clear decision .
MOMENTUM / October 2016 27